New York State Health Insurance Program

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New York State Health Insurance Program
Empire Blue Cross and Blue Shield -
Payments to John T. Mather Memorial Hospital

Purpose
To determine: 1) whether Empire BlueCross and BlueShield’s (Empire’s) payments to John T. Mather Memorial Hospital were made according to the provisions of its agreement with the hospital and 2) whether Empire’s payments for certain special items were reasonable. The audit covers the period January 1, 2007 through June 30, 2010.

Background
The New York State Health Insurance Program (NYSHIP) provides health insurance coverage to active and retired State, participating local government and school district employees and their dependents. The Empire Plan (Plan) is the primary health benefits plan for NYSHIP and includes prescription drug coverage. The Department of Civil Service contracts with Empire to provide hospitalization coverage under the Plan.

The Long Island Health Network (Health Network) is comprised of ten hospitals, including John T. Mather Memorial Hospital (Mather). Empire’s agreement with the Health Network allows the hospitals to be reimbursed for special items (e.g. implants, drugs, and blood) that are not included on Empire’s standard rate schedules. Although the base hospital stay and related procedures covered under the agreement are reimbursed at rates prescribed in fee schedules, Mather can submit claims for certain items (not on fee schedules) separately as “special items.”

Key Findings

We found Empire did not have appropriate controls to protect the State from excessive billings. As a result, Mather was allowed to substantially mark up the amounts billed. We estimate Mather was reimbursed almost 300 percent of the purchase price for special items with an estimated total profit of $707,351 on 138 claims we reviewed.

Key Recommendations

Ensure the agreement with Mather includes language which prescribes the basis of payment for special items. Such language should preclude the submission of excessive claims and require Mather to provide appropriate supporting documentation (including invoices for special items) upon request.

Other Related Audits/Reports of Interest

New York State Health Insurance Program: Payments Made to Hudson Valley Hospital Center Report 2009-S-99

New York State Health Insurance Program: Payments Made to Stony Brook University Medical Center Report 2009-S-27

New York State Health Insurance Program: Payments Made for Special Items at Selected Hospitals Report 2010-S-74

State Government Accountability Contact Information:Audit Director: Brian MasonPhone:(518) 474-3271; Email:StateGovernmentAccountability@osc.state.ny.usAddress: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236